NY Times Article – Fever Builds for iPhone (Anxiety Too)

NY Times Article – Fever Builds for iPhone (Anxiety Too)

John Markoff of NYT interviewed me for this iPhone article. It will appear in tomorrow’s paper.

(Source: NYT)


Fever Builds for iPhone (Anxiety Too)


SAN FRANCISCO, June 3 — During an onscreen demonstration of the iPhone in Apple’s sprawling retail store here recently, an employee, clad in a black T-shirt, of course, surprised a potential customer.

Nonplused, the customer stammered, “You mean it’s a cellphone, too?”

Such is the spell that Steven P. Jobs has cast on the American consumer.

It has been almost six months since Mr. Jobs, the world’s consummate salesman, introduced the iPhone as the Ronco Veg-O-Matic for the Internet era. Tongue only partly in cheek, Mr. Jobs promised that Apple’s entry into the cellular handset market would be a better phone, Web browser and music player.

Mr. Jobs succeeded in building expectations for what some have called “the God machine.” The bar-of-soap-size phone is being coveted as a talisman for a digital age, and iPhone hysteria is beginning to reach levels usually reserved for video-game machines at Christmas.

Although the phones are expected to cost as much as $600 when they go on sale at Apple and AT&T stores later this month, each company has received more than a million inquiries about the product’s availability. Apple disclosed in television commercials Sunday night that the phone would be released June 29.

Further evidence that expectations have been wound up to a fever pitch: the phones, or promises to deliver a phone, are already on sale on eBay for $830. A pundit as unlikely as Arianna Huffington sought out Mr. Jobs directly for advice on being the first to score a phone. (He told her to go to an AT&T store.)

Last week, during an appearance at a technology industry conference in Southern California, Mr. Jobs teased the audience by briefly pulling an iPhone out of his jeans pocket and immediately slipping it back out of sight.

The anticipation, which is intense even by Jobsian standards, has led to some quiet, behind-the-scenes anxiety at Apple. Some Apple executives worry privately that expectations for the one-button phones may be too high and that first-generation buyers will end up disappointed.

Certainly there are skeptics. The high price will limit the phones’ appeal to true believers. The cellular network that the iPhone operates on is slower than those of many of its rivals. Several of Apple’s handset competitors hope that its decision not to include a keyboard, relying instead on a touch-screen virtual keyboard, will limit the attractiveness of the iPhone in text-intensive business markets.

“It’s very media-centric,” said a director at a handset competitor who declined to be identified, saying that his company did not want to elicit comparisons with the iPhone. “It will hit one sweet spot, but not necessarily all of the sweet spots — we hope.”

As has often been the case during the last three decades, Mr. Jobs’s timing may be impeccable.

While entire industries have been struggling for more than half a decade to find the right combination of features to merge cellphones and computers, Apple appears to have stepped in at precisely the right moment.

“These devices have become ubiquitous, and there’s an enormous hunger out there,” said Peter Schwartz, the chairman of Global Business Network, a consulting firm based here.

Most analysts believe that Apple will easily exceed its initial goal of selling 10 million phones by the end of next year.

“It will be just 1 percent of the handset market,” said Jagdish Rebello, director of wireless communications research at iSuppli, a market research firm based in El Segundo, Calif. “But it is essentially shifting the balance of power into the hands of the mobile device manufacturers.”

News reports out of Asia in recent weeks indicate that Apple may have placed an order for an additional five million phones with Quanta Computer, a Taiwanese manufacturer that is a leading maker of laptop computers. Another Taiwanese manufacturer, Hon Hai Precision Industry, was earlier reported to have been awarded the original order. Apple declines to comment on its plans.

Although a tiny fraction of the global phone industry, a 1 percent market share would make Apple a head-to-head competitor with the high-end version of Microsoft’s Windows Mobile software, which is used on a number of smartphones.

During the first quarter of 2007 Microsoft’s software was used on about 3.2 million personal digital assistants, or about 60 percent of the market, according to Gartner, the market research firm. Microsoft has come to dominate the market against competitors like Palm, Research In Motion and Symbian, but Apple’s entry is likely to reset the most profitable high end of the handset market.

“It will change the whole category of what people think a phone is,” said Richard Doherty, president of the Envisioneering Group, an industry consulting firm.

To head off potential consumer disappointment, Apple said several months ago that it would have the ability to add features to the iPhones after they were purchased. The company’s executives say that the capability to upgrade the iPhone in the field will give it a significant advantage over other cellphones, which are usually replaced frequently.

“Other carriers are scrambling to figure out what their strategies should be,” said Chetan Sharma, an industry consultant who follows the wireless data market.

One potentially crucial factor in determining the iPhone’s success that has yet to be clarified by the company: How willing is Apple to permit independent software vendors to develop programs for the iPhone? When he introduced the phone in January, Mr. Jobs seemed unwilling to permit outside software development. He said that opening that door would tend to raise both security and stability issues that were unacceptable in the wireless handset market.

Last week, however, at the D: All Things Digital conference, he seemed to relent. He said Apple was looking for ways to make it possible for developers to create software for the iPhone.

A person briefed on Apple’s plans said that at its software developer conference this month, Apple intends to announce that it will make it possible for developers of small programs written for the Macintosh to easily convert them to run on the iPhone.

Software, Mr. Jobs said last week, is what would make the difference. Poor software, he said, is what undermined the Japanese consumer electronics industry. And by that same token, software is what will give the iPhone what he said would be a five-year lead on the rest of the handset industry.

“If you look at the iPhone, it’s software wrapped in wonderful hardware,” he said.